The Japanese government will issue an additional 1.8 trillion yen of bonds this fiscal year to make up for a shortfall in tax revenue and to help pay for a third extra budget, government sources said.
Reflecting sluggish corporate tax revenue, the government will cut its fiscal 2016 tax revenue estimate by 1.7 trillion yen to 55.9 trillion yen, the sources said.
For the first time since fiscal 2009, the government has slashed its tax revenue estimate and been compelled to issue additional deficit-covering bonds in the middle of a fiscal year.
The Japanese government had already increased its reliance on debt as it issued 2.75 trillion yen of bonds to pay for the second supplementary budget. The further bond issuance will bring the total debt issuance this fiscal year to about 39 trillion yen.
The government had expected to cut its tax revenue projection by 1.9 trillion yen, but now projects a smaller decline because the yen’s sharp depreciation since the November U.S. presidential election is likely to bolster corporate earnings.
As for the fiscal 2017 budget, the government is making arrangements to compile a record-high general-account budget totaling between 97 trillion yen to 97.5 trillion yen.
The government aims to limit new government bond issuance to 34 trillion yen, similar to the amount initially planned for the current fiscal year, as it projects tax revenue to exceed the 57.60 trillion yen initially estimated for this year.
The government expects tax revenue to increase as it projects the economy will expand a nominal 2.5 percent in fiscal 2017.
The cabinet of Prime Minister Shinzo Abe will approve both the fiscal 2017 initial budget and the third supplementary budget for fiscal 2016 on Dec 22.
Under the third extra budget, the government will allocate 200 billion yen to rebuild areas hit by natural disasters including earthquakes in Kumamoto and Tottori prefectures, while spending 170 billion yen on enhancing defense capabilities.
To fund the extra budget, the government will use 420 billion yen saved on interest paid on government debt due to lower interest rates, and will issue 100 billion yen of bonds to make up for the shortfall.